City tax plan for housing growth earns state OK

LOWELL -- The state has signed off on the city's blueprint to utilize a new tax-incentive program to boost creation of market-rate housing downtown.

The approval by the state's Department of Housing and Community Development of Lowell's Housing Development Incentive Plan -- as well as its downtown zone for the development -- means developers of eligible projects in the city center can apply for state tax credits and city tax breaks for building market-rate units.

The Housing Development Incentive Program is designed to boost the production of market-rate housing in 24 Gateway Cities across the state. Lowell was the second city after Pittsfield to have a zone and plan approved by the state.

Assistant City Manager Adam Baacke said he expects inclusion in the state program will help spur the next wave of redevelopment of vacant and underutilized buildings downtown, such as commercial buildings with empty upper floors.

"By supporting market-rate housing development, it can also help the city encourage more households with disposable income to live in downtown, which in turn strengthens the market for restaurants and retailers, who have been challenged by the recession," Baacke said in a statement.

"Lowell, more than most Gateway Cities, has seen this work really well, with thousands of new market-rate residents over the past decade helping to support dozens of businesses.

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Additional market-rate housing also will help the city both attract and retain young college graduates, which could entice high-technology and green-technology companies to the city, as well as other large companies, said Baacke.

Eligible projects are those that result in the creation of two to 50 units of market-rate housing for sale or lease. The state is able to offer a tax credit up to 10 percent of qualified rehabilitation expenses up to $1 million. There will be a $5 million annual cap on the state tax credits.

The credits should help make market-rate projects possible because the economic downturn has made it more difficult for developers to finance such developments.

Low-income housing has continued to be produced during the past several years because of both state and federal tax credits that support the creation of that type of housing.

The state housing incentive program also allows for a local-option property-tax abatement on all or part of the increased property value resulting from improvements made to eligible properties. Accords on those exemptions are called Tax-Increment Financing agreements, or TIFs.

"The local tax abatements are a required component of the program if the state is going to provide the larger tax credits, so Lowell will pursue those on appropriate projects," Baacke said.

The city's housing plan and zone first were approved by the City Council.

City Councilor Bill Martin, chairman of the council's housing subcommittee, said he is glad the city's plan and zone were approved by the state. He said he hopes the incentive program can spur redevelopment of some of the more difficult properties left to develop in the downtown.

The councilor said the program also should help the city continue to improve the ratio between market-rate to affordable housing in the city center, which since 2000 has gone from 20 percent to 80 percent, to 50-50.

The key, Martin said, will be seeing whether the amount of tax credits allocated to projects is enough to make them financially feasible for developers.

"I view the state program as a positive, but not a game changer," Martin said. "The challenge is the properties that have not been redeveloped in the downtown are very expensive to redevelop without some significant financial assistance."

One project that could benefit from the tax incentives is the plan for 47 market-rate units in the historic Chalifoux building at the corner of Merrimack and Central streets.

Officials from the Department of Planning and Development have discussed the state incentive program with the Chalifoux development team.

They have also discussed the program with representatives from the Lowell Community Health Center, which may pursue residential development in the Hamilton Canal District geared its employees, said Baacke.

Several other properties could possibly benefit, he said.

The city had hoped WinnDevelopment's plan for 77 new units at the Boott Mills (West), 80 percent of which would be market-rate units, and Mira Development LLC's plans for more than 30 units of market-rate housing at the former Lawrence Mills complex on Perkins Street, could have participated.

The projects were deemed ineligible. Both projects are proceeding without the program, said Baacke.

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